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Dynamic Scoring: A Back-of-the-Envelope Guide

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Author Info
N. Gregory Mankiw
Matthew Weinzierl

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Abstract

This paper uses the neoclassical growth model to examine the extent to which a tax cut pays for itself through higher economic growth. The model yields simple expressions for the steady-state feedback effect of a tax cut. The feedback is surprisingly large: for standard parameter values, half of a capital tax cut is self-financing. The paper considers various generalizations of the basic model, including elastic labor supply departures from infinite horizons, and non-neoclassical production settings. It also examines how the steady-state results are modified when one considers the transition path to the steady state.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11000.

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Date of creation: Dec 2004
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Handle: RePEc:nbr:nberwo:11000

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Find related papers by JEL classification:
E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
H6 - Public Economics - - National Budget, Deficit, and Debt

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References listed on IDEAS
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  3. Jonathan A. Parker, 1999. "The Reaction of Household Consumption to Predictable Changes in Social Security Taxes," American Economic Review, American Economic Association, vol. 89(4), pages 959-973, September. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Philippe Michel & Leopold von Thadden & Jean-Piere Vidal, 2005. "Debt stabilizing fiscal rules," Computing in Economics and Finance 2005 349, Society for Computational Economics. [Downloadable!]
    Other versions:
  2. Eric M. Leeper & Shu-Chun Susan Yang, 2006. "Dynamic Scoring: Alternative Financing Schemes," Caepr Working Papers 2006-022, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington. [Downloadable!]
    Other versions:
  3. Alejandro Cuñat & Szabolcs Deák & Marco Maffezzoli, 2008. "Tax Cuts in Open Economies," Working Papers 332, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
    Other versions:
  4. Giovanni Ganelli & Juha Tervala, 2008. "Tax Reforms, "Free Lunches", and "Cheap Lunches" in Open Economies," IMF Working Papers 08/227, International Monetary Fund. [Downloadable!]
  5. François Gourio, 2008. "Is there a majority to support a capital tax cut?," Boston University - Department of Economics - Working Papers Series wp2008-001, Boston University - Department of Economics. [Downloadable!]
  6. Thor O. Thoresen, Jørgen Aasness and Zhiyang Jia, 2008. "More realistic estimates of revenue changes from tax cuts," Discussion Papers 545, Research Department of Statistics Norway. [Downloadable!]
  7. Richard W. Kopcke, 2005. "The taxation of equity, dividends, and stock prices," Public Policy Discussion Paper 05-1, Federal Reserve Bank of Boston. [Downloadable!]
  8. Javier Coto-Martínez & Carlos Garriga & Fernando Sánchez-Losada, 2007. "Optimal taxation with imperfect competition and aggregate returns to specialization," Working Papers 2007-036, Federal Reserve Bank of St. Louis. [Downloadable!]
    Other versions:
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